2024 (7) TMI 1600 - AT - Service Tax

Manpower services from overseas company subject to reverse charge service tax under Section 66A but demands restricted to normal limitation period

Bangalore International Airport Limited Versus The Commissioner Office of the Commissioner of Service Tax, Bangalore

CESTAT Bangalore held that manpower services supplied by overseas company to appellant were leviable to service tax under reverse charge mechanism, ... Liability to discharge service tax - Management Consultancy Services - Manpower Supply Agency Service - availment of inadmissible levy of service tax under airport services on the deposit amount collected from unsuccessful bidders - CENVAT credit on various input services - extended period of limitation. Whether manpower service supplied by M/s. Unique to the appellant, is leviable to service tax under reverse charge basis, for the period in question? - whether the ratio of the judgment in the case of CC, CE & ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967 - SUPREME COURT] is applicable to the facts and circumstances of the present case? - HELD THAT:- In the ‘Expatriate Remuneration Reimbursement Agreement’ dated 11.7.2005 between the appellant and M/s. Unique reveals that the terms and conditions are more or less similar to the one referred to in para 3 of the judgment of the Hon’ble Supreme Court in Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967 - SUPREME COURT]. In the present case also, the appellant was in need of personnel for facilitating the business operations in India and the overseas company, which has such personnel, who possesses the requisite qualification and skill desired to employ such persons on exclusive basis and the overseas company has duly consented to depute such personnel. The deputed personnel while under employment with the appellant was not in any way subjected to any kind of instruction or control or direction or supervision of the overseas company and they would report only to appellant’s management. They function solely under the control, direction and supervision of appellant and in accordance with the policy, rules, guidelines applicable to the employees of the appellant. The service tax is applicable on the amount paid to M/s Unique for receiving Manpower service by the Appellant. However, the demand of service tax confirmed by the Ld. Commissioner cannot be sustained for the period prior to 18.4.2006 and also for the extended period as their Lordships on the issue of invocation of extended period of limitation, decided in favour of the assessee. Consequently, the demand be restricted to normal period of limitation. On the issue of reimbursable expenses, it is found that the Ld. Commissioner has not recorded any specific finding about the true nature of the said expenses as claimed by the appellant and hence, the matter needs to be remanded to the Ld. Commissioner, to verify the said claim of the appellant and decide the issue in the light of the principle laid down by the Hon’ble Apex Court in Intercontinental Consultants and Technocrats Pvt. Ltd. case [2018 (3) TMI 357 - SUPREME COURT]. Confirmation of demand relating to Airport Services rendered by the appellant during the relevant period - HELD THAT:- The Revenue could not establish that the unsuccessful bidders have rendered any services to the appellant and thus, the amount collected as a pre-bid offer from unsuccessful bidders cannot be considered as a “consideration” for rendering Airport Services and accordingly not leviable to Service Tax. However, the Ld. Commissioner has confirmed the demand on altogether a different ground. He has held that except submitting list of unsuccessful bidders, no documentary evidence has been placed on record to prove that the said amounts relate to unsuccessful bidders and consequently, he has confirmed the demand. Therefore, to ascertain this fact, this issue needs to be remanded to the adjudicating authority. CENVAT Credit on various input services namely, photography and videography services, asset hiring, landscaping services, office rent, civil and interior work, etc. - HELD THAT:- All these services have been considered by the Tribunal in the case of JSW Steel Ltd. Vs. CCE [2021 (12) TMI 381 - CESTAT BANGALORE] and held that the same satisfy the definition of “input service” as prescribed under Rule 2(l) of the CENVAT Credit Rules, 2004, hence, duty paid on these services is admissible to credit. Following the said precedent, it is opined that CENVAT credit of the duty paid on these services is admissible. Conclusion - i) The demands relating to the period prior to 18.04.2006, for all categories of services received from the overseas company cannot be sustained. ii) The demands with interest confirmed on ‘Manpower Supply Services’ received from the overseas company for the period after 18.4.2006, under reverse charge mechanism are sustained for the normal period of limitation only. iii) The applicability of Service Tax on the amount collected from unsuccessful bidders as pre-bid fees and retained is not liable to service tax under Airport Services. However, the adjudicating authority is directed to verify from the records whether the disputed amount relates to unsuccessful bidders only, as claimed by the Appellant. iv) The CENVAT Credit availed on various input services are admissible and hence demands on this issue are set aside. v) The penalty imposed on the Appellant cannot be sustained. All these appeals are remanded to the adjudicating authority to recompute the demands with interest - appeal allowed by way of remand. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:(i) Whether the appellant is liable to pay service tax under the reverse charge mechanism for services received under the category of 'Management Consultancy Services' and 'Manpower Supply Agency Service' during the relevant periods, in light of the Supreme Court judgment in CC, CE&ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd.(ii) Whether service tax is applicable under airport services on deposits collected from unsuccessful bidders.(iii) Whether CENVAT credit is admissible on various input services utilized by the appellant.(iv) Whether the extended period of limitation is applicable in one of the appeals, and whether interest and penalties are justifiably levied on the appellant.ISSUE-WISE DETAILED ANALYSISManpower Supply Agency ServiceThe Court examined whether the services provided by M/s. Unique to the appellant qualify as 'Manpower Supply Agency Service' under the reverse charge mechanism. The appellant contended that the agreement with M/s. Unique was different from the agreement considered by the Supreme Court in Northern Operating Systems Pvt. Ltd. The Court analyzed the 'Expatriate Remuneration Reimbursement Agreement' and found it similar to the agreement in the Northern Operating Systems case. Therefore, the Court concluded that the appellant is liable for service tax under the reverse charge mechanism for the normal period of limitation, but not for the extended period.Management Consultancy ServicesThe appellant disputed the demand for service tax under 'Management Consultancy Services' for the period prior to 18.04.2006, citing the Indian National Shipowners Association case, which exempts such demands before the introduction of Section 66A. For the post-18.04.2006 period, the appellant argued that the expenses were reimbursable and not subject to service tax. The Court found that the demand for the period before 18.04.2006 is unsustainable. For reimbursable expenses, the matter was remanded to verify claims in light of the Intercontinental Consultants and Technocrats Pvt. Ltd. judgment.Airport ServicesThe appellant argued that service tax on amounts collected from unsuccessful bidders is unjustified, as these were not for services rendered. The Court agreed in principle but remanded the issue to verify whether the amounts indeed pertain to unsuccessful bidders.CENVAT CreditThe appellant claimed CENVAT credit on various input services, which the Court found admissible based on precedent set in JSW Steel Ltd. Vs. CCE. The demands on this issue were set aside.Extended Period of Limitation and PenaltiesThe Court held that the issues involved were interpretative, with no suppression of facts by the appellant. Therefore, the invocation of the extended period of limitation and the imposition of penalties were unsustainable.SIGNIFICANT HOLDINGSThe Court established several core principles:(1) Service tax demands for periods prior to 18.04.2006 on services received from overseas companies are unsustainable.(2) Service tax on 'Manpower Supply Services' post-18.04.2006 is applicable only for the normal period of limitation.(3) Amounts collected from unsuccessful bidders are not liable to service tax under Airport Services, subject to verification.(4) CENVAT credit on input services is admissible.(5) Penalties imposed on the appellant are unsustainable.The appeals were remanded to the adjudicating authority for recomputation of demands with interest, in accordance with these findings.